I have a 500k mortage with 29 years to go. Currently have about 5-6K extra savings after maxing out 401(k), expense, and mortage payment. I think it is too risky to put money in the stock market given the recent volatility - should I use the extra money to pay off mortage earlier? My after-tax mortage rate is 2.5% so still better than savings account

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What’s the monthly payment? Can you refinance to a 15 year?


In terms of market, it’s about your personal risk tolerance and outlook on the market. With a long term outlook, investing seems to make sense as the 2.5% is relatively low. And if you are investing smaller amounts month over month, it can reduce risk as your diversifying over a timeline

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Meant 5-6K savings per month. I already have an emergency fund of 6-8 months of expenses in online savings

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Yeah I like that plan, congrats on being so financially secure. Can you contribute to an HSA or maybe a bit to a 529?

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HSA only for people with high deductible health insurance plans

I’ve done this (albeit not with a mortgage, but with other smaller pieces of debt), and justify the fact that it’s theoretically not the correct financial move by qualifying it as a “Peace of Mind” expense.

Again, in theory your capital could be used to garner a better return if it was put to use elsewhere, but there’s real value in your peace of mind.

This move helps give it to you.

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I think you’re going to see some opportunity in the coming year and the best bet would be to start stockpiling cash right now in a HYSA. That way it’s not tied up and not at risk with the stock market.

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This is what I did. Mortgage rate was 1.8% but I paid it off anyways. Less anxiety. But I know this isn’t the conventional advice.

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Thanks EY2!

You may want to look at your interest schedule and see how much you’d actually save if you applied early payments - it’s not going to be 2.5%!

The thing to know about mortgages and other loans is that the interest schedule is set based on loan amount and HEAVILY frontloaded by the way it’s calculated. Your early payments will reduce principle but your interest payments month to month are going to be the same as you proceed through the term if your mortgage. For example - if you’re schedule to pay 1000$ in interest next month, that’s what you’re going to pay even if you paid your principle balance all the way down to $5. Where you do save is the interest you would have paid between when your principle hits 0 and when it was suppose to hit 0. However, at that time, you’re not paying much if anything in interest!

So to see, look at your mortgage schedule. If you’re paying ahead 5,000 see how many months in principal that cuts off starting at the end of your schedule. Then add up the interest for those months and that’s what you’d save. It’ll be like $2 saved and 30 years to get there on your 5,000 investment! Haha

This is a tad bit different than credit cards and other debt where what you owe is based on your current debt amount. If you have any of these, that’s where your logic would hold up really well.

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Thanks anyway! I had the same thoughts earlier and checked my payment schedule - early payment does reduce monthly interests so it is like an investment with 2.5% guaranteed return

Buy more real estate. At 5-6k a month you could payoff a turnkey rental within a year or so, and cash flow 500-1,000 a month. Then apply *that* income against your mortgage. Or - better yet - buy a very rentable 2BR in a still affordable destination city (Colorado Springs, not SF; Nashville, not NYC) where rent will cover the mortgage and appreciation will multiply your down payment.

Did strategy 2. In last 1.5 years my equity is 2x-2.5x my original investment. Put time on your side!

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https://www.madfientist.com/mortgage-payoff-experiment/

Same age and mortgage rate as you- I pay down the mortgage a little extra throughout the year, and reduce bond buying accordingly since yields are shit. Obviously two completely different asset classes, but I lump them into the ‘low return/safe investment’ part of overall allocation.

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